The  General  Principles  of  Organization 
Applied  to  an  Individual  Manufacturing  Establishment 

By  HENRY  R.  TOWNE 

President  of  Yale  & Towne  Manufacturing  Company 
THE  POSSIBILITIES  OF  EFFICIENCY  IN  MANAGEMENT 

By  various  authorities  we  are  informed  that  there  are  at  least  one 
hundred  ways  of  defining  “efficiency,”  and  I shall  venture  on  one  of 
them,  and  that  is  “the  percentage  of  money  spent  to  the  profits 
earned,  or  to  the  results  produced.” 

Whatever  definition  we  may  accept,  however,  this  is  true  in  eco- 
nomics and  in  management,  that  the  result  is  less  than  the  applied 
effort.  It  cannot  be  more  than  unity;  it  rarely  reaches  it.  There  is 
always  some  loss  by  friction,  and  the  problem  of  the  efficiency  engineer 
is  to  reduce  that  loss. 

Now,  taking  the  mechanical  field,  let  us  see  what  inspiration  we 
can  draw  from  that  as  to  the  possibilities  of  this  new  science  which 
we  are  taking  as  a specialty  for  a new  organization.  Take  steam  en- 
gineering: in  Smeaton’s  time,  about  135  years  ago,  it  took  35  pounds 
of  coal  in  a furnace  to  produce  one  horse-power;  whereas,  to-day  it 
takes,  with  good  practice,  less  than  1 pound.  In  boiler  efficiency,  even 
now  we  are  getting  only  1 2*4  per  cent,  of  the  theoretical  efficiency, 
and  steam  engineers  have  that  great  field  or  margin  still  to  work 
upon. 

Let  me  refer  now  to  a product  of  my  own  factory.  Twenty-three 
or  twenty-four  years  ago  the  Weston  differential  pulley  block  was  the 
best-known  device  as  a self-sustaining  hoisting  machine.  Its  efficiency 
was  about  28  per  cent.  It  has  been  practically  superseded,  all  over 
the  world,  by  the  Triplex  chain  block,  the  efficiency  of  which  is  79  per 
cent.  It  is  hardly  likely  that  we  can  accomplish  elsewhere  in  this 
field  a similar  increase  of  almost  three-fold  greater  efficiency.  These 
are  two  illustrations  of  what  has  been  done  in  increasing  mechanical 

Read  at  the  first  meeting  of  the  Efficiency  Society,  held  in  New  York  City,  March  18 
and  19,  1912. 

II — I 


efficiency.  In  human  efficiency  the  field  is  a new  one  and  an  open 
one.  It  is  virgin  soil,  almost. 

Then  there  is  the  other  direction,  efficiency  of  management,  man- 
agement not  only  of  industrial  plants  but  of  all  kinds  of  business, 
commercial,  transportation  and  banking.  There  is  no  field  where  you 
may  not  increase  the  efficiency  of  human  effort.  It  is  a new  proposi- 
tion. The  effort  in  the  past  was  to  increase  the  productiveness  of 
industrial  plants  by  the  larger  use  of  machinery,  and  thereby  to  in- 
crease the  output  per  unit  of  employee.  But  what  we  are  learning  now 
can  be  done,  is  to  increase  the  productiveness  of  the  individual  human 
unit,  by  applying  higher  study  to  his  individual  work,  and  by  training 
him  how  to  utilize  the  knowledge  which  we  so  acquire. 

THE  BASIS  OF  THE  SCIENCE 

The  movement  is  in  full  swing,  although  we  are  just  starting  to 
crystallize  it  by  organization,  and  I believe  that  the  greatest  single 
contribution  to  it  thus  far,  certainly  in  the  industrial  field,  is  Dr.  Tay- 
lor’s theory  of  time  study.  That  is  the  Baconian  system  applied  to 
industrial  facts  and  conditions,  as  a basis  on  which  to  reason  from 
them  to  better  things ; and  therefore,  to  my  mind,  it  marks  the  greatest 
single  contribution  to  this  new  science  that  has  yet  been  made.  There 
are  many  others.  Functional  management  may  be  put  next  in  rank, 
but  planning  and  routing  and  stores  management  are  parts  of  this 
harmonious  whole. 

The  dictionary  tells  us  that  science  is  knowledge  acquired  by  sys- 
tematic observation  and  correct  thinking,  which  knowledge  has  been 
coordinated  and  arranged.  That  is  the  function  of  this  new  organiza- 
tion. To  bring  together  a lot  of  knowledge  which  is  in  the  minds  and 
notebooks  of  the  members,  and  in  the  records  of  the  great  corpora- 
tions, to  bring  that  knowledge  together  into  a common  fund,  where  it 
shall  be  available,  not  for  the  individual  or  one  concern,  but  for  all. 
It  is  to  do  for  management  what  science  has  done  for  architecture, 
medicine,  and  engineering,  by  bringing  together  the  results  of  the 
studies  of  all  who  are  active  in  that  field,  and  making  them,  in  turn, 
available  for  all  others. 

Enough  work  of  this  kind  has  been  done  already  to  show  that  we 
have  begun  to  lay  the  foundations  of  the  science.  The  papers  read  in 
our  engineering  societies,  and  published  in  their  journals  and  in  books, 
taken  collectively,  constitute  a definite  and  valuable  nucleus  for  the 
new  science. 

II— 2 


"T  £6  to 

Now,  the  results  in  mechanical  efficiency  have  been  obtained 
through  the  application,  consciously  or  unconsciously,  of  the  Baconian 
system  of  induction.  The  same  process,  I predict,  will  be  followed  in 
this  new  science,  not  only  in  its  application  to  industrial  plants,  where 
it  has  first  taken  root  and  where  already  much  has  been  accomplished, 
but  in  its  extension  from  that  into  businesses  of  all  kinds — transporta- 
tion, merchandising,  any  field  of  activity  in  which  the  human  factor 
is  a large  and  essential  element  in  the  economy  of  the  total  processes, 
and  especially  where  the  final  result  depends  upon  the  coordination  of 
the  efforts  of  large  bodies  of  men. 

EXAMPLES  OF  INCREASED  EFFICIENCY 

Again,  resorting  to  past  facts  to  illustrate  future  possibilities,  and 
because  I believe  they  will  interest  you  as  examples  of  concrete  results 
in  individual  cases,  I have  put  on  paper  a few  of  the  results  obtained 
at  the  plant  at  Stamford,  of  which  I am  the  official  head,  as  the  result 
of  applying  this  modern  system  of  intensive  efficiency  under  the  Taylor 
system. 

I have  taken  four  cases,  selected  at  random,  which  I will  designate 
as  A,  B,  C,  and  D. 

In  case  A,  after  the  system  had  been  effectually  established,  there 
was  a reduction  in  labor  cost  of  the  article  of  50  per  cent. ; an  increase 
in  the  wage-earnings  of  the  operatives  of  81  per  cent. ; and  an  increase 
in  the  output  of  275  per  cent.,  with  the  same  machine. 

In  case  B,  the  labor-cost  was  reduced  45  per  cent.;  the  pay  was 
increased  15  per  cent.,  and  the  output  increased  1.1  per  cent. 

In  C,  the  labor  was  reduced  76  per  cent,  and  the  output  was  in- 
creased three  and  a half  times.  The  rate  of  wages  earned,  however, 
was  decreased  14  per  cent.  The  explanation  of  that  reduction  in  the 
earnings  of  the  operatives  was  that  the  process  had  been  so  much  im- 
proved that,  whereas  before  it  required  highly  skilled  labor,  it  now 
became  possible  to  use  less  highly  skilled  labor.  But  in  doing  these 
operations,  the  less  skilled  operatives  earned  more  than  they  could  at 
other  occupations. 

In  case  D,  the  labor  cost  was  reduced  49  per  cent.,  and  the  wages 
earned  increased  91,  and  the  output  was  increased  four  times. 

In  one  case  the  former  rate  of  output  was  800  pieces,  and  the  new 
rate  was  2,900.  In  another,  the  old  was  2,500,  and  the  new  6,000. 
In  another  the  old  was  3,500,  and  the  new  7,090;  and  in  another  the 
old  was  1,750,  and  the  new  7,000. 
n— 3 


These  are  concrete  examples  of  what  efficient  management  can  do, 
even  where  the  work  was  previously  done  under  conditions  which  up 
to  the  last  few  years  would  have  been  considered  excellent. 

The  total  efficiency  of  the  department  where  this  new  system  was 
established  was  so  increased  that,  whereas  in  1907,  with  all  machinery 
employed,  and  some  overtime  required  to  get  the  needed  output,  that 
output  was  80,000  units,  in  1910,  with  some  of  the  machinery  not  in 
use,  and  with  no  overtime,  the  output  was  120,000  units.  I may  state  that 
it  took  two  and  a half  years,  and  cost  about  $25,000  to  get  the  new 
system  established  in  that  department,  an  expenditure  of  money  and 
time  which  at  first  seemed  discouraging,  but  which  was  persevered  in, 
and  which  has  been  justified  by  the  outcome.  I mention  this  for  the 
encouragement  of  others  who  may  be  discouraged  and  in  doubt. 

Again,  as  an  illustration  of  the  benefits  to  be  derived  from  func- 
tionalizing, let  me  give  one  or  two  concrete  examples.  In  our  own 
plant,  to  which  I refer,  as  I have  the  data,  we  functionalized  the  care 
of  belting.  We  have  in  all  some  6,000  belts  to  take  care  of.  Prior  to 
1907  the  belts  were  taken  care  of  as  in  all  of  the  similar  shops,  the 
smaller  ones  by  the  operators  at  the  machines,  and  the  main  belts  and 
the  jack-shaft  belts  by  men  who  were  not  specialists  in  this  field.  In 
1906  the  cost  per  belt  was  96  cents.  As  a result  of  specialization,  in 
1907,  it  was  reduced  to  73  cents.  In  1908  it  was  reduced  to  45  cents. 
In  1909  and  1910  it  was  reduced  to  42  cents,  which  is  about  where  it 
stands  to-day.  And  we  appear  to  have  about  reached  bottom. 

Here  we  have  a reduction  of  cost  of  more  than  one-half  from 
the  preceding  condition.  And  as  illustrating  how  these  things  pay, 
the  difference  between  the  former  and  present  cost,  multiplied  by  the 
number  of  belts,  makes  $3,240  per  annum,  which  you  can  put  your 
finger  on  as  a direct  saving.  Even  better  is  the  saving  from  having  all 
belts  adjusted  properly.  These  results  have  been  duplicated  in  many 
cases. 


THE  NEED  FOR  EXPERTS 

Facts  like  these  point  the  way  to  things  which  should  be  sought  oul 
and  attempted  in  other  fields  of  human  activity  in  the  effort  to  attair 
higher  efficiency.  The  same  method  which  accomplished  the  result  ir 
that  plant  will  accomplish  it  elsewhere ; namely,  that  of  applying  highe- 
intelligence  and  study  to  the  specific  problems.  But  to  succeed,  th 
higher  intelligence  is  needed,  and  it  is  the  best  economy  to  emplo 
experts  at  the  start,  and  then  later  to  turn  the  work  over  to  men  wh 
have  been  trained  by  them.  In  that  connection,  I may  quote  an  excel 


lent  definition  by  ex-Controller  Metz,  who  defined  an  expert  in  this 
way : “The  scientific  man  knows  why ; the  practical  man  knows  how ; 
the  expert  knows  why  and  how,”  There  is  a lot  of  sense  in  that 
definition. 

The  men  whom  we  need  as  efficiency  engineers  should  be  experts 
in  that  sense.  They  need  to  know  both  the  why  and  the  how : the 
why  in  order  to  aid  them  in  learning  the  how;  and  the  how  in  order 
to  transmit  it  to  the  men  who  are  to  do  the  work  under  their  direction. 

THE  WORK  OF  SCIENTIFIC  ORGANIZATION 

Now,  to  come  more  directly  to  the  topic  which  has  been  assigned  to 
me,  I will  venture  to  define  the  scientific  principles  of  efficiency  or- 
ganization in  an  industrial  plant. 

The  first  requirement  is  a receptive  attitude,  and  especially  at  the 
head  of  the  business.  If  the  manager  of  the  business  approaches  this 
subject  in  an  attitude  of  antagonism  or  of  such  deep-seated  doubt  as  to 
have  no  faith  in  it,  he  had  better  let  it  alone.  It  is  not  an  easy  prob- 
lem, nor  a short  one.  It  is  a very  profound  problem,  which  will  take 
a long  time  to  work  out  successfully,  and,  unless  you  have  the  right 
attitude  of  receptiveness  at  the  start  and  at  the  head,  you  had  better 
lay  it  aside  until  you  can  get  those  prerequisites. 

The  second  thing  is  knowledge  of  the  science  down  to  the  date 
when  you  undertake  to  apply  it  to  your  business.  Some  heads  of  de- 
partments may  have  that  knowledge  and  are  competent  to  apply  it. 
They  are  the  exception  and  not  the  rule,  however;  and  where  that 
technical  knowledge  is  not  possessed  down  to  date,  they  should  seek 
the  expert.  There  has  developed  a new  field  of  engineering,  which 
we  recognize  as  closely  identified  with  this  association  and  the  move- 
ment it  stands  for,  in  which  such  experts  may  be  found. 

The  third  factor,  in  order  and  importance,  I should  put  as  that  of 
functionalizing  on  rational  lines.  You  cannot  make  much  progress  in 
any  highly  organized  and  ramified  business  until  you  have  function- 
alized to  some  extent.  Cut  loose  from  the  old  plan  of  military  organi- 
zation, in  which  one  man  is  at  the  head  of  each  room,  or  department, 
or  shop,  with  so  many  hands  under  him,  and  is  supposed  to  direct  and 
control  everything  that  every  one  does.  Get  away  from  that  military 
basis,  and  on  to  the  better  and  more  modern  basis  of  functionalized 
management,  under  which,  while  that  man  may  still  remain  as  the 
captain  and  be  responsible  for  discipline  and  general  direction,  other 
men  will  have  charge  of  certain  functions  pertaining  to  the  work  car- 

ii— 5 


ried  on  in  the  room  or  shop  by  its  occupants,  each  of  whom  are  special- 
ists in  their  respective  fields  or  departments,  and  who  are  used  as  such 
in  all  departments  of  the  plant. 

The  next  in  sequence  is  the  segregation  of  this  new  system  from 
your  current  work.  If  you  attempt  to  combine  one  with  the  other, 
one  or  both  will  suffer.  Probably  the  new  system  will  go  to  the  wall 
and  not  be  effectively  accomplished.  It  should  be  segregated,  both  in 
its  management  and  physically,  by  that  management  being  located  in 
an  office  by  itself. 

The  next  essential  is  a competent  head,  best  of  all  an  outside  man, 
having  experience  in  this  field,  and  not  hampered  by  the  conditions  and 
requirements  of  your  current  work. 

The  next  and  last  in  order  is  the  selection  of  the  line  of  least  re- 
sistance. Find  out  your  easy  problems  and  take  those  first,  especially 
in  regard  to  the  human  element.  Start  your  work  in  shops  or  rooms 
where  the  human  attitude  is  not  antagonistic.  Finally,  put  all  of  these 
facts  together,  develop  your  method  of  planning,  of  time  studies,  of 
stock  cards,  and  everything,  so  that  the  whole  system  may  be  put  into 
operation  harmoniously,  and  make  sure  that  your  leaders  give  it  a 
fair  chance  at  the  beginning.  The  management  behind  the  plan  must 
have  courage,  faith,  and  confidence.  If  you  have  the  conviction  that 
it  can  be  applied  to  your  business,  that  others  have  made  it  succeed, 
and  that  you  can,  then  you  will  succeed  in  the  end.  The  whole  aim 
in  an  industrial  establishment  may  be  summed  up  in  a concrete  phrase : 
it  is  the  effort  to  have  the  right  article  in  the  right  place  in  the  right 
quantity  and  at  the  right  time.  If  you  accomplish  that,  you  will  have 
nearly  all  you  can  ask  for  in  the  way  of  movement  of  material  through 
your  plant.  This  statement,  of  course,  relates  only  to  management  of 
men  and  material,  not  to  the  operation  of  machines. 

As  a final  word,  I would  like  to  say  that  there  have  been  a good 
many  definitions  of  efficient  management  as  applied  to  industrial  plants, 
but  here  is  a new  one:  that  it  is  a five-thousand-dollar  intelligence 
applied  to  the  study  of  five-dollar  or  five-cent  jobs  and  problems  to  find 
out  how  they  should  be  done,  and  then  to  teach  the  five-dollar  or  the 
three-dollar  or  the  two-dollar  man  how  to  do  them.  Then  your  $5,000 
intelligence  passes  on  to  the  next  job. 

11— 6 


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